Long a path to financial security, traditionally African-American schools are now producing graduates who struggle with disproportionately high debt. The Student-Debt Crisis Hits Hardest at Historically Black Colleges (#GotBitcoin

Historically black colleges and universities helped lift generations of African-Americans to economic security. Now, attendance has become a financial drag on many of their young graduates, members of a new generation hit particularly hard by the student-debt crisis.

Students of these institutions, known as HBCUs, are leaving with disproportionately high loans compared with their peers at other schools, a Wall Street Journal analysis of Education Department data found, and are less likely to repay those loans than they were a decade ago.

Among key findings of the Journal’s examination of 2017 data, the latest available:

HBCU alumni have a median federal-debt load of about $29,000 at graduation—32% above graduates of other public and nonprofit four-year schools.

The majority of HBCU grads haven’t paid down even $1 of their original loan balance in the first few years out of school.

America’s 82 four-year HBCUs make up 5% of four-year institutions, but more than 50% of the 100 schools with the lowest three-year student-loan repayment rates.

Though HBCUs typically cost less than other public and nonprofit four-year schools, these colleges have long trailed those peers on measures of debt and repayment. Now they are trailing by far greater margins.

Many HBCUs see a mandate in giving opportunity to disadvantaged youth, who often start out with fewer financial resources and a diminished ability to pay.

At Stillman College in Tuscaloosa, Ala., the board until recently included alumni from rural Alabama working as lawyers, doctors and ministers, said its president, Cynthia Warrick. “They’ve told me that no one else would take them but Stillman. I think we have a responsibility to still be that place.”

Graduates of four-year for-profit colleges, which weren’t part of the Journal’s comparisons, have similar overall repayment rates and median debt loads to HBCU alumni, an analysis of federal data shows.

The HBCU debt gap has widened partly because of simple math. Tuition increases have outstripped inflation across America. Black families have the least wealth of the largest U.S. racial groups, Federal Reserve data show. Parents of black college students have lower incomes and are less likely to own homes than those from other racial groups, Education Department data show.

So in coping with tuition increases, black students have fewer resources to draw on than many Americans. Borrowing proportionally more has been the solution for many black students and families.

Theo Dorsey, 25, graduated from Hampton University in 2015, nearly three decades after his father did from Southern University at New Orleans, another HBCU. He borrowed $20,500 and has been paying off mostly interest on an income-based repayment plan. He didn’t see an alternative to debt, and his parents “wanted me to be able to chase my dreams and get my higher education like they were able to.”

Now a television reporter in the Greensboro, N.C., area, he still owes nearly $20,000 and “bills and loans eat up most of my checks as is.” He said he earns less than $50,000 a year, and the loan has made him put off saving as much as he would like. “The odds are kind of stacked up against me,” he said. “It doesn’t feel fair, but it’s all I know.”

He also plans to help repay the roughly $91,000 his father took out for him in federal parent loans. His father, Tyrone, said he graduated with about $1,500 in debt in 1986—about $3,500 in today’s dollars—and repaid within two years. “You want to position your children for an opportunity to be successful,” the father said, but carrying debt is “kind of tough to swallow.”

In 2011, the Obama administration tightened underwriting standards on parents of any race who took out loans for children. It reversed the move, with new rules published in 2014, after schools—including many HBCUs—said the rules would block access for some students and force others to drop out.

Tuitions have risen faster than a traditional funding source for low-income students—federal Pell grants. A weak postcrisis economic recovery meant lagging income for many low-income families, federal data show, leaving proportionally less to pay for education.

Blacks typically earn less than whites after college, so they have fewer resources to repay. Black college graduates between ages 21 and 24 earned nearly 17% less per hour, on average, than white graduates of the same age range in 2018, according to an analysis of census data by the Economic Policy Institute, a left-leaning think tank.

Early this decade, many students began taking advantage of the expansion of income-driven repayment plans that essentially defer part of each payment, helping drive down repayment rates.

The struggle with debt goes beyond HBCUs. About half of African-American borrowers who were freshmen at any type of college in the 2003-2004 school year defaulted on a student loan within 12 years, more than twice the rate of white borrowers, according to a June 2018 paper by Columbia University associate professor Judith Scott-Clayton. She said her research has found that even controlling for socioeconomic status, blacks have bigger debt burdens than whites.

‘Shocking Data’

Black former HBCU students are more likely to default over a 12-year period than blacks attending other public and nonprofit four-year colleges, federal data show. A possible factor: Roughly a quarter of four-year HBCUs are so-called open-enrollment schools, which typically accept students with low high-school grades and standardized-test scores. Nationwide, federal data show, open-enrollment schools have high default rates.

Each year, the Education Department reports data on student debt and repayment from a rolling two-year period—the latest covering the two fiscal years ending 2017. The department calculates a median debt load for each school’s graduates and dropouts those years—not including parent debt or private loans—which the Journal used, along with the number of borrowers, to calculate weighted medians. The agency also calculates repayment rates for students who left school roughly three years earlier, who haven’t defaulted and who are paying down what they borrowed.

The student-debt crisis is hitting families, too. Parents of students attending four-year HBCUs borrowed about $14,000 on average in federal student loans for the 2017-2018 school year, 33% more than in 2000-2001, adjusted for inflation.

Tom Hundley’s mother is among parents still struggling with debt they took on for their children. Mr. Hundley headed to prestigious Howard University with high hopes. “You see older people that you knew from here and there, and they talk about how great it is,” he said. “You get caught up in their stories, and you want to make your own.”

His mother, Pat Hundley, 67, owes about $62,000 in federal parent loans, a balance that is growing because she can’t afford the full monthly payment of over $400, she said. Until recently, she was paying $50 a month toward the balance as part of a reprieve granted by her servicer, she said, and has filled out paperwork through her servicer to reduce the monthly payment from the full amount. She is waiting to hear back.

Her son borrowed the maximum in federal undergraduate loans, he said, and finished in 2015 with a political-science degree. At 28, he owes about $39,000 and pays $500 monthly from his $45,000 annual salary filing patent applications. He lives in low-income housing and has put off saving for a home. He feels guilty about his mother’s debt and hopes to pay it off. “I’m still really glad I got to go to Howard,” he said. “But the expense is something that alters my choices.”

In the 2000-2001 school year, Howard’s tuition and fees were about $10,000, or $14,000 in today’s dollars. Today, they run about $27,000. Howard’s president, Wayne Frederick, said it routinely provides scholarships and grants for students from poor families.

“We are consistently and constantly pushing towards trying to limit the amount of loans students take against the reality of the overall need of the entire student body,” he said. He hadn’t heard of Mr. Hundley, he said, but his debt “obviously is a situation that we want to avoid as much as possible.”

Howard’s three-year loan-repayment rate among graduates and dropouts was 35% in 2017, compared with roughly 60% for public and nonprofit four-year colleges nationwide. Howard’s repayment rate was 58% in 2010.

“It was probably the most shocking data of my career,” said Zakiya Smith Ellis, a former higher-education adviser to President Obama, and now New Jersey’s higher-education secretary. “We like to think of bachelor degrees as the Holy Grail.”

Many HBCUs opened after the Civil War and in the first half of the 20th century when public and private universities often denied admission to African-American students. The schools often started out severely behind their peers financially. Many never caught up, despite government efforts that the schools say have been insufficient.

Meanwhile, many non-HBCU peers have amassed larger endowments, which provide some relief of the pressure to raise tuition on low-income students. Two-year and four-year HBCUs still enroll roughly 300,000 students, though they now compete with formerly white-only institutions for students with the best grades and test scores.

Black former HBCU students are more likely to default over a 12-year period than blacks attending other public and nonprofit four-year colleges, federal data show. A possible factor: Roughly a quarter of four-year HBCUs are so-called open-enrollment schools, which typically accept students with low high-school grades and standardized-test scores. Nationwide, federal data show, open-enrollment schools have high default rates.

Each year, the Education Department reports data on student debt and repayment from a rolling two-year period—the latest covering the two fiscal years ending 2017. The department calculates a median debt load for each school’s graduates and dropouts those years—not including parent debt or private loans—which the Journal used, along with the number of borrowers, to calculate weighted medians. The agency also calculates repayment rates for students who left school roughly three years earlier, who haven’t defaulted and who are paying down what they borrowed.

The student-debt crisis is hitting families, too. Parents of students attending four-year HBCUs borrowed about $14,000 on average in federal student loans for the 2017-2018 school year, 33% more than in 2000-2001, adjusted for inflation.

Tom Hundley’s mother is among parents still struggling with debt they took on for their children. Mr. Hundley headed to prestigious Howard University with high hopes. “You see older people that you knew from here and there, and they talk about how great it is,” he said. “You get caught up in their stories, and you want to make your own.”

His mother, Pat Hundley, 67, owes about $62,000 in federal parent loans, a balance that is growing because she can’t afford the full monthly payment of over $400, she said. Until recently, she was paying $50 a month toward the balance as part of a reprieve granted by her servicer, she said, and has filled out paperwork through her servicer to reduce the monthly payment from the full amount. She is waiting to hear back.

Living on Social Security in Cherry Hill, N.J., she is working part time to cover her bills. “I’m going to die with that debt,” she said, “unless I win the lottery.”

Her son borrowed the maximum in federal undergraduate loans, he said, and finished in 2015 with a political-science degree. At 28, he owes about $39,000 and pays $500 monthly from his $45,000 annual salary filing patent applications. He lives in low-income housing and has put off saving for a home. He feels guilty about his mother’s debt and hopes to pay it off. “I’m still really glad I got to go to Howard,” he said. “But the expense is something that alters my choices.”

In the 2000-2001 school year, Howard’s tuition and fees were about $10,000, or $14,000 in today’s dollars. Today, they run about $27,000. Howard’s president, Wayne Frederick, said it routinely provides scholarships and grants for students from poor families.

“We are consistently and constantly pushing towards trying to limit the amount of loans students take against the reality of the overall need of the entire student body,” he said. He hadn’t heard of Mr. Hundley, he said, but his debt “obviously is a situation that we want to avoid as much as possible.”

Howard’s three-year loan-repayment rate among graduates and dropouts was 35% in 2017, compared with roughly 60% for public and nonprofit four-year colleges nationwide. Howard’s repayment rate was 58% in 2010.

Janai Cain, 20, enrolled in Clark Atlanta University in fall 2016 but left the Atlanta HBCU after learning the financial aid she would receive the next year would be lower than she expected. She spent a year at a community college, though she hoped to re-enroll at a four-year school to study finance. She was accepted at several other HBCUs but didn’t enroll because she felt the financial-aid packages were inadequate.

Ms. Cain lives with her aunt in Madison, Wis., and works full time at a warehouse for a clothing company. She owes nearly $17,000 on her student loans.

“It’s becoming slightly overwhelming” to think about those payments coupled with health care, car payments and saving to move out, she said.

Countermeasures

To improve loan repayment and increase graduation rates, Paul Quinn College, a Dallas school with many low-income students, has imposed tougher enrollment standards such as a higher grade-point average requirement. From the 2015-2016 year, the historically black college began requiring students to work part-time on campus or at corporations that compensate students in part by covering some tuition.

It cut tuition and fees nearly 40% to $8,275 in the 2015-2016 year. They are about $9,000 for the current year, not accounting for room and board. Many students pay less because of grants.

At roughly $31,000, the median federal debt for Paul Quinn as of 2017 exceeded debt at about 95% of four-year colleges. That’s more than quadruple what Paul Quinn graduates owed in 2001, adjusted for inflation, but down about 22% from the 2014 peak. With about 500 students, it has one of lowest loan-repayment rates, 21%, among the bottom 2% of all four-year colleges.

Paul Quinn’s president, Michael Sorrell, said those don’t yet reflect changes the college has put in place because it takes time to “move the needle.”

Internal school figures show the 2018 graduating class left owing a median of about $21,000, he said, and students enrolling in the 2015-2016 year are on track to graduate with an average of about $14,000. His goal is to reduce average student debt to roughly $10,000.

Officials at Miles College in Fairfield, Ala., several years ago began limiting how much a student can borrow for nontuition personal expenses, said Diana Knighton, its senior vice president for finance and business administration.

The HBCU has in recent years shifted its curriculum toward majors leading to higher-paying jobs, she said. The median debt load for graduates was $33,755 in 2017, among the highest in the country but down an inflation-adjusted 11% from its 2015 peak.

Stillman College several years ago started targeting “higher-achieving high-school students,” shifting resources from students it traditionally served, including many from poor Alabama areas, said Ms. Warrick, its third-year president. The HBCU has returned to focusing on traditional students, she said. Though Stillman’s repayment rate, 25%, is among the country’s lowest, it improved 4 percentage points between 2016 and 2017.

“We’re working on a strategy to address our low repayment rate,” she said, and recently began an apprenticeship program to give students more opportunities.

“HBCUs are still left to do the heavy lifting of educating students whose educational ability are called into question,” said Crystal deGregory, an HBCU historian and Kentucky State University associate professor.